Loans and Debt Resolution - Caribbean protectorates

In the early twentieth century, debt repayment emerged as a significant
U.S. foreign policy issue when dictatorships in several Caribbean
republics—regimes that had managed to live on loans granted by
European banking and speculative interests—demonstrated an
incapacity or plain unwillingness to pay that brought threats of armed
intervention from European powers. The classic instance was that of
Venezuela, whose reckless behavior had aroused the anger and contempt of
the great powers, including the United States. In 1902 the British and
German governments, joined nominally by Italy, blockaded Venezuela and
seized the country's customs, the revenues from which would then be
utilized toward redemption of the debts. This method, which proved
effective but also aroused American susceptibilities over the Monroe
Doctrine (1823), soon brought from the administration of Theodore
Roosevelt (1901–1909) an important policy shift, namely, that the
United States would henceforth be responsible for the behavior of the
Latin American republics toward Europe. In due course, then, the United
States assumed fiscal supervision over several Caribbean countries.

The principal recipients of American "protection" were Cuba,
Panama, the Dominican Republic, Nicaragua, and Haiti. The special
relations of the United States to these republics were embodied in
treaties, no two of which were exactly alike. To only one such
state—the Republic of Panama—did the United States actually
promise "protection," in the declaration that "the
United States guarantees and will maintain the independence of the
Republic of Panama." Other treaties, such as those with Cuba and
Haiti, contained engagements on the part of the "protected"
states not to impair their independence or cede any of their territory to
a third party; and the same two treaties permitted intervention by the
United States for the maintenance of independence or of orderly
government. Since careless public finance was likely to lead to foreign
intervention and possible loss of independence, a number of the
treaties—those with Cuba, Haiti, and the Dominican
Republic—contained restrictions upon, or gave the United States
supervision over, financial policy.

American investments existed in all the countries of this Caribbean
semicircle of protectorates. These no doubt benefited from the increased
stability and financial responsibility induced by governmental policy. In
the Dominican Republic, Haiti, and Nicaragua that policy resulted in a
transfer of the ownership of government obligations from European to
American bankers. Yet in none of the five republics save Cuba were
American financial interests especially large or important. The dominant
motive was clearly political and strategic rather than economic. The
acquisition of the Canal Zone and the building of the Panama Canal made
the isthmian area a crucial concern in the American defense system.